When most people book a vacation rental online these days, HomeAway is typically still their first go-to. The company has been the 800-pound gorilla in the online vacation rental market space for almost a decade now since acquiring its chief rival VRBO (arguably the platform that started it all) back in 2006.
It’s been equally that long since the vacation rental business was a desktop, mom-and-pop enterprise to scrape some extra cash off your ski condo. The global vacation rental market now represents one of the most potentially disruptive forces in global hospitality. When VRBO sold out to HomeAway, the site had just over 60,000 listings, almost exclusively located in the U.S. Today HomeAway, now publically traded, has over a million vacation rental properties in 190 countries with various versions of their site translated into over 40 languages worldwide. HomeAway’s annual revenues exceeded $500 million in 2015, with a total current market valuation of almost $3 billion. And there’s more room to grow. There are an estimated 10 million additional vacation homes sitting vacant for most of the year around the world.
HomeAway’s business model has been surprisingly simplistic: growth and superiority through acquisition. Since its founding in 2005, HomeAway has snatched up over 20 other vacation rental sites, consolidating them under a single technology platform. They were the first company to employ this strategy back in 2005 funded by big capital guns like Austin Ventures and Google Ventures, who both realized early on that this elementary “roll-up” approach could result in plum returns with very little overhead.
Around 2012, Airbnb burst onto the scene out of relative obscurity, rapidly establishing itself as the major potential threat to HomeAway’s supremacy. According to recent interviews with HomeAway’s CEO, however, HomeAway never really considered Airbnb direct competition. HomeAway has always focused on renting houses, based on an annual homeowner subscription model. Airbnb launched itself as a platform for people looking to scrape together a few extra bucks from renting out a room, or even a couch, in their apartment.
That’s all changed now that the vacation rental space has continued to evolve and mature. Yet, while HomeAway and Airbnb have been veering ever closer to each other in terms of their platforms, marketing, and target demographics, their most formidable and sophisticated competitor has been quietly gaining on both of them, and may just be on the verge of becoming the vacation rental business's next 800-pound gorilla.
In reality, TripAdvisor Vacation Rentals has been HomeAway’s most dangerous under-the-radar threat for years. And the future may get more precarious. TripAdvisor Vacation Rentals now has over 830,000 properties listed on their site in over 190 countries, just shy of HomeAway’s million. Raw numbers notwithstanding, TripAdvisor Vacation Rentals also has three strategic advantages over HomeAway and Airbnb that would take their competitors years to replicate.
First, TripAdvisor is the world’s largest, oldest, and most trusted online travel community. There are over 400,000,000 million travel reviews on TripAdvisor , including not only reviews of their vacation rentals but also reviews of all the restaurants, bars, local attractions and activities nearby. Second, once a traveler books a vacation rental through TripAdvisor they can also immediately book their flights, rental cars, and any other travel services required all under one roof without having to flip to another travel site, which complicates an itinerary with multiple bookings, reservations, and credit card charges.
"TripAdvisor’s greatest strength is its ecosystem and its holistic approach," explains TripAdvisor Vacation Rentals ' Head of Business Development, Ben Drew. "We have the best-valued flights, the greatest new restaurants, the most exciting attractions and, yes, the most unique, convenient, affordable, as well as luxury vacation rentals. We help travelers to plan the perfect trip in its totality. TripAdvisor’s original raison d'être was to help travelers have amazing experiences. And that’s exactly what we’re providing with our vacation rental platform. We’ve grown our inventory by more than 16x since we launched in 2008, and we’re excited about our growth trajectory and how this will enrich the travel experience for TripAdvisor users."
TripAdvisor Vacation Rentals ' biggest advantage against HomeAway and AirBnB, however, has only emerged recently, and it’s called big data. Since TripAdvisor was founded 2000, the website has amassed a Google-Amazon-esque goldmine of consumer-based reviews and other information on travelers' habits, preferences, and demographics, all of which they have at their digital fingertips to improve their vacation rental platform's user interface and experience as well as improve its integration with TripAdvisor's wider ecosystem.
If this exclusive interview with Ben Drew doesn’t put a shiver in HomeAway’s growth plans and AirBnB’s high-flying bluster, they might just need to go rent a “bubble house” from TripAdvisor in Costa Rica.
How and when did TripAdvisor get into the vacation rental business?
TripAdvisor entered the business of vacation rentals in 2008 with the acquisition of FlipKey, a Boston-based company. We began listing vacation rentals directly on TripAdvisor shortly afterwards and we have grown quickly from there, both organically and through further acquisitions. In 2010 we acquired UK-based Holiday Lettings, followed by the Spain-based Niumba in 2013 and the Massachusetts-based Vacation Home Rentals in 2014. We most recently acquired HouseTrip, a UK-based business, this past April. We’ve evolved from an entirely non-transactional and subscription listing-based business now to a full-service booking platform.
Where do vacation rentals fit into TripAdvisor’s overall business and brand ecosystem?
In a short period, we’ve grown into one of the world’s leading vacation rental providers and this is now a large and lucrative part of TripAdvisor . Since our inception in 2008, we’ve multiplied by more than 16x – from 50,000 properties, comprised mostly of traditional vacation homes in destinations like Orlando and Myrtle Beach, to 830,000 properties in 190 countries. Our inventory is now vast and varied. We list everything from chalets in Verbier, studio apartments in Sydney, Australia, cottages in rural England, condos in Florida, beachfront homes in Malibu, and even tree houses in Costa Rica.
Just like hotels, restaurants and local attractions, our vacation rental business is vital to TripAdvisor’s overall mission: To help all travelers unleash the full potential of their trips.
What’s the advantage for TripAdvisor Vacation Rentals to be part of the world’s “largest travel community"?
We’re the only place a traveler can find their rental and then go on to book themselves into the top-ranked restaurants, tours and attractions in their chosen destination, as decided by our community of hundreds of millions of travelers all over the world. We’re a platform like no other; our travelers get the insider knowledge of our homeowners combined with the collective wisdom of our more than 400 million travel reviews. The experience TripAdvisor offers is holistic. Take, for instance, a traveler going to Sydney. Whether that traveler is looking for a chain hotel, a luxury boutique property, a private room or a modern penthouse apartment, they’re going to find and book that property through us and then finish planning their itinerary on our flights, restaurants, attractions and tours pages. Every section of our business – hotels, attractions, restaurants and rentals – is fundamental to our raison d'être: to help travelers have amazing travel experiences.
What’s the driving force in your opinion behind the explosive growth in vacation rentals worldwide and how is TripAdvisor Vacation Rentals taking advantage of these fast-moving trends?
The travel industry is vast and quickly growing and there’s plenty of room for vacation rentals and hotels to continue to co-exist as they have for decades.
The rentals sector is indeed growing fast – a TripAdvisor survey showed that 67% of travelers planned to stay in a rental in 2016, up from 59% in 2015 and 52% in 2014. As for reasons behind the growth, the same survey showed that affordability, location and amenities were travelers’ top three reasons to choose a rental.
The affordability of rentals makes travel far more accessible. Last month in Rome, for example, renting a two-bedroom home was on average $1,500 cheaper, or 55% less, than booking two hotel rooms. In Sydney the savings was over $1,100 per week or 47%, and in Cancun it was nearly $2,000 or 45%. Since almost all rentals have kitchens and many have parking, the savings continue after check-in with fewer meals out and no parking costs.
As for location, rentals offer a variety and flexibility that traditional accommodations can’t always match – like an apartment in a residential neighborhood, a farmhouse in a rural area, a cottage on a remote lake or a log cabin in the woods. These properties also typically come with amenities that make a trip much more convenient and enjoyable – backyards, kitchens, living spaces, extra bedrooms and more.
We’re always improving our platform to stay at the top of the industry. It’s been hard in the past to find and book rentals and we’re making that easier and easier. We’re constantly growing our supply of homes to keep up with demand, we’re making it increasingly easier to search our 830,000 properties to surface the best matches, and we provide safe, reliable and protected payment methods.
Above all else, we’re focused on what makes us so useful to travelers – leveraging the wisdom of our more than 400 million travel reviews to book the best possible rentals, restaurants, attractions and tours for their trips.
Can you share with Forbes’ readers some of your basic traffic and booking statistics to give them a sense of how dominant a player TripAdvisor Vacation Rentals has become in the space over the last few years?
TripAdvisor as a whole reaches 390 million average monthly unique visitors. We have 435 million reviews and opinions covering 6.8 million accommodations, restaurants and attractions. We list more 830,000 rental properties, and around 80% of our rental properties are bookable online through TripAdvisor and come with payment protection.
HomeAway and Airbnb would be wise to keep one eye looking over their shoulders. And not just at each other.